Dear ladies and gentlemen, welcome to the SAF-HOLLAND SE Q1 2025 results. Today's presenters are CEO Alexander Geis and CFO Frank Lorenz-Dietz. The presentation slides are available on the SAF-HOLLAND corporate website. The presentation will be followed by a Q&A session. Please note this conference call will be recorded and published on the corporate website of SAF-HOLLAND SE. Everything spoken through the unmuted microphone will be processed during the online meeting and published on the website of SAF-HOLLAND SE. If a participant does not wish to be recorded, they should refrain from participating in the Q&A session and keep the microphone muted. The Q&A session is exclusively for institutional investors and analysts. All other participants of the conference call are kindly asked to contact the investor relations team directly if they have any questions. Mr. Geis, the floor is yours.
Thank you. Good morning, everyone, and welcome to our conference call and our Q1 2025 results. Let me please start with some recent strategic highlights on page three. We are very proud to have presented our new DRIVE 2030 strategy at our Capital Markets Day at the end of March. The DRIVE 2030 strategy is based on the five strategic pillars of customer focus, regional strengths, technology as a core enabler, leverage portfolio and drive growth, and operational excellence. This is underpinned by the two cross-cutting themes of people focus and sustainability. In the coming years, we intend to grow more strongly through specific strategic initiatives in addition to the underlying growth of the commercial vehicle market. The positioning as a systems supplier will be pushed, and the aftermarket business will be strengthened through digital solutions and a further expansion of our service network globally.
Another focus will be on adapting products to new application areas, e.g., by selling the Haldex air disc brakes in the truck and bus sector. We also see growth potential outside the traditional trailer and truck business. In future, a significant sales contribution will be generated with customers from related industries such as agriculture, mining, construction, and the material handling sector. We expect gross sales to be more than EUR 3 billion in 2030, combined with a strong adjusted EBIT margin of between 10% and 12%. A first strategic step within DRIVE 2030 was the takeover of the remaining 40% stake in our Indian joint venture with the ANAND Group. With this, we were able to better utilize the Indian growth prospects going forward.
Among other things, the cooperation with our Indian subsidiary York is to be intensified with regard to the sales and distribution network to better serve our customers. Also here, we are bundling systems now. In addition, the complete takeover simplifies the localization of the entire Haldex product portfolio in India, such as trailer ABS and also air disc brakes. Let's move to the next page, please, to see the financial highlights for the first quarter. The past quarter was characterized by continued weak end markets. In figures, this means that our group sales fell organically by 14%, which was partially offset by acquisition-related effects, and ultimately reached EUR 449.2 million, which is around 11% below the prior year.
Nevertheless, despite significantly weaker OE markets, we were able to maintain our profitability on a solid level with an adjusted EBIT margin of 9.5%, while the adjusted EBITDA margin improved to 13.3%. Moreover, we were able to achieve a strong operating free cash flow of EUR 8.2 million in Q1 despite a lower top-line development, and our leverage remains at 1.9 times. In a nutshell, SAF-HOLLAND was again able to demonstrate the resilience of its business model in a challenging market environment. Let me continue with the group sales and adjusted EBIT development. On page six, you can see that the group sales in the first three months of 2025 continued to be impacted by slow commercial vehicle markets in all three regions. Recently, the North American OE market was affected by the uncertainty caused by the trade policy discussions, which was also impacting the demand in the APAC region.
I will come back to this shortly. Accordingly, OE sales were 14.8% below the previous year's level, which ultimately resulted in an organic sales decline of 14% year- over- year. In contrast, acquisition-related sales from TECMA and Assali Stefen contributed EUR 12.7 million to top-line. Hence, sales in the first quarter declined by 11.1%. Accordingly, adjusted EBIT in the first three months of the year decreased by 12.1% compared to the previous year's level, resulting in an almost stable adjusted EBIT margin of 9.5%. Our adjusted EBITDA margin increased from 12.6% to now 13.3%. Coming on the next page to the sales split by region and customers. Due to the last year's acquisitions of TECMA and Assali Stefen, the sales share of the EMEA region remained almost stable with 48.7%, while the OE market continued to be slow.
The Americas region was affected by the weaker trailer and truck market and contributed 39.3% to group sales. Moreover, due to the softer demand in the APAC region, which I will explain shortly, the APAC share decreased slightly to now 12%. Now looking at the split by customer group, in total, sales from the OE business decreased by 14.8% year over year to EUR 270.96 million, which was due to the weaker commercial vehicle markets worldwide. Accordingly, the trailer OE segment accounted for 49.1% of sales in the first quarter, while the truck segment, of which a major share comes from the Americas, was impacted by the uncertainties around tariffs, economic outcomes, and inflation. In contrast, you can see the aftermarket business decreased only by 4.4% to EUR 169.6 million.
However, it continues to be a resilient pillar of the SAF-HOLLAND business model, and as a result, the aftermarket business was 37.8% of sales in total. Coming to the EMEA region on the next page, please, you can see that the top-line development in the EMEA region remained slow due to a softer development of the trailer market that is expected to have declined between 25%-30% year over year. Hence, our sales fell organically by 16% in Q1. As mentioned before, moreover, the recent acquisitions of TECMA and Assali Stefen came in with sales of EUR 12.7 million in the first three months of the year.
Despite that, the aftermarket business continued to develop very robustly in that region in EMEA, and therefore, based on the lower top-line development, the adjusted EBIT margin declined to 7.5%, but was also negatively impacted by the higher depreciation ratio due to the recent acquisitions in 2024, as well as a one-time FX effect. While comparing with Q4 last year, please keep in mind that the margin was positively impacted by a reallocation of intercompany charges for the last quarter of 2024. Coming to the Americas, you can see that besides the cyclically lower commercial vehicle markets in North America, the demand for the truck and trailer, as well as the respective aftermarket business, was negatively impacted by uncertainties around tariffs, economic outcomes, and inflation.
Specifically in the aftermarket, we had some dealers that were really cautious in ordering new spare parts, so we could see a slight decline in aftermarket orders coming in here. Accordingly, sales declined organically by 11.2% in the first three months of the year. Nevertheless, adjusted EBIT remained strongly in the double-digit percentage range and benefited from strict cost management, as well as efficiency improvements in the production facilities. As a result, the adjusted EBIT amounted to EUR 20.1 million, which corresponds to an improved margin of 11.4%. Coming now to our third region, which is the APAC region on the next page, please. Specifically, the recovery in the Indian trailer market that emerged at the end of last year has unfortunately not continued in 2025.
This is due to the uncertainties around U.S. tariffs, as well as more difficult financing conditions for our fleet operators and trailer manufacturers. In addition, the mining business in Asia and Australia was weak, and the commercial vehicle market in China declined slightly. Accordingly, sales in the first three months of 2025 amounted to EUR 53.9 million and was 15.3% below the previous year, which means an organic decline of 14.8%. Looking at the bottom line, we were able to hold a solid profitability level with an adjusted EBIT of EUR 6.2 million or 11.4 percentage points. Having said this, I hand over to Frank for the key financials for Q1.
Yeah, thank you, Alex, and hello to everybody on the line. As usual, I will start with a short overview on the adjusted EBIT reconciliation for the group on page 12. Our reported EBIT for the first quarter 2025 decreased by 17.3% to EUR 35.9 million. We benefited from solid operational performance despite the decline in group sales, but it was negatively impacted by lower coverage on depreciation amortization, as well as sequentially higher PPA amortization and transaction cost. In total, restructuring and transaction cost adjustments amounted to EUR 0.9 million, mainly from the integration cost of TECMA and Assali Stefen. The depreciation and amortization from purchase price allocation was, as usual, adjusted and amounted to EUR 5.9 million, and hence slightly increased compared to the prior year, again due to the acquisition of TECMA and Assali Stefen in the second, respectively, first quarter 2024.
Adjusted EBIT reduced by -12.1%, almost in line with the top-line reduction, and thus the adjusted EBIT margin almost reached the prior year level. Moreover, due to the solid operating performance, adjusted EBITDA reduced only by 6.4% and resulted in an improved adjusted EBITDA margin of 13.3%. Moving on to page 13, where you see the bridge from EBIT to basic earnings per share. As said before, reported EBIT amounted to EUR 35.9 million for the first three months of 2025. Unfortunately, due to the weaker US dollar compared to the euro, the finance result in the past quarter was influenced by unrealized exchange rate effects, which I will explain to you on the next page shortly.
In addition, income taxes declined in accordance with our top-line development, but were impacted by non-capitalized deferred tax assets and interest and loss carry forwards, as well as the application of the global minimum taxation regulation. Thus, the overall tax rate amounted to 35.1% for Q1 2025. Overall, reported EPS was impacted by the lower top-line development, as well as the untraceable development of the finance result in the first quarter. Let me shortly explain to you the reported effects from unrealized FX valuations for the reporting period on page 14. The finance result amounted to minus EUR 15.3 million during the first quarter. Also, the financial result was impacted by interest expenses from interest-bearing loans of approximately EUR 8 million, which is in line with our forecast for the full year.
We saw strong unrealized currency effects, mainly from intercompany loans at the closing rate, which mainly relates to the weaker US dollar. The US dollar alone caused a negative unrealized FX effect of minus EUR 7 million during the first quarter. Against this development, the Brazilian real, as well as other currencies, in total had a positive effect of around EUR 1.2 million. In total, the negative unrealized effect remains with minus EUR 5.8 million. In comparison, in the first quarter 2024, we had a positive effect on the same positions in the amount of plus EUR 3.6 million. I'd like to emphasize once again that unrealized FX effects are pure valuation effects, not possible to forecast, but do not have an impact on our cash flow. Nevertheless, we are introducing or have introduced several mitigation measures in order to minimize those fluctuations. In general, these FX effects are based on different topics.
For example, there is a legacy cash pool within the Haldex entities. As part of the Haldex PMI process, this one will be transferred into the new SAF-HOLLAND cash pool, which will be completed by the end of this year at the latest. In addition, we are going to reorganize our intercompany financing in order to mitigate those effects. Nevertheless, this will take some time, but you can expect this to be finalized in the second half of the year. Moving to page 15, where you see the development of the equity ratio. Compared to year-end 2024, equity improved by 2.3%, respectively EUR 12.3 million to EUR 539.4 million, mainly due to the result of the period. Since the balance sheet total grew only by 1.1%, equity ratio improved further to 31.2%. Turning on page 16, I would like to speak about the networking capital development.
Networking capital increased by 6.5% to EUR 310.1 million compared to the end of 2024. The increase of networking capital positions was mainly seasonally driven, but we were able to keep the networking capital comparatively low, both for inventories but also trade receivables. As a result, networking capital ratio amounted to 16.9% of sales, and thus in the target corridor for 2025 of 16.5%-18%. In addition, factoring amounted to EUR 42.3 million at the end of March 2025. Now let me address the cash flow development on page 17. Net cash flow from operating activities in the first quarter amounted to EUR 16.4 million and was positively driven by the lower cash outflow from better networking capital performance in Q1 compared to the prior year. In addition, paid income taxes declined along the lower top-line development in previous periods.
Moreover, investment in property, land, and equipment, and intangible assets amounted to EUR 8.6 million, which corresponds to 1.9% of sales. Those investments mainly focused on the further automation and modernization of production processes, as well as on the preparations for the new plant in Rowlett, Texas, as well as the capacity expansion for air disc brakes and fifth wheels in Düzce, Türkiye, where we had our opening ceremony for our second plant last week. Hence, we achieved a solid operating free cash flow of EUR 8.2 million already in the first quarter this year. Moving on to an overview of the leverage development on page 18. Based on our positive operating free cash flow performance, net debt remained almost at the same level as at the end of 2024.
Within the net debt, we were repaying EUR 69 million in financing due in March, as planned from our own funds and included refinancing measures in the amount of EUR 39 million. Overall, the net debt/EBITDA ratio at the end of March remained stable compared to the end of December 2024 and amounted to 1.9 times. Having said that, back to you, Alex, for the outlook and closing remarks.
Yeah, thank you, Frank. So everybody, I'm on page 20, showing the fiscal year 2025 forecast for the trailer and truck markets. As you can see, as the truck and trailer markets have been affected by uncertainties regarding import tariffs, economic developments, and inflation in recent months, an adequate forecast for the current year is only possible to a limited extent. As of today, we expect the weaker development in the Americas region, as well as in India, especially in the first half of the year. Accordingly, we currently expect both the truck and trailer markets in North America to be 10%-20% below the previous year's level, which is also based on the uncertainty around the introduction of the new emission regulation for trucks in 2027. Hence, we currently do not expect a pre-buy effect in 2025.
We also expect the commercial vehicle market in Brazil to develop in the range of 0% to -5% due to more difficult financing conditions. In India, as described before, trailer production is expected to also develop in the range of 0% to -5% compared to 2024. Our market expectations for EMEA and China remain unchanged. In EMEA, we currently expect the recovery to start in the second half of the year, and I can report here that we also see some good signs in the second quarter of this year. Even though we currently face a lot of geopolitical uncertainties that might impact the global commercial vehicle markets, you should be aware that SAF-HOLLAND is well equipped to react quickly and efficiently. Having said that, that brings me to the guidance for 2025 on page 21. Basically, our guidance remains unchanged for all KPIs.
If the markets perform as explained before, we assume our group sales to come in between EUR 1.85 billion and EUR 2 billion. We have set up a comprehensive action plan to compensate for any potential negative effects in the short term, including production and supply chain adjustments or price adjustments. Means we feel comfortable with our profitability guidance and continue to expect an adjusted EBIT margin between 9%-10% and the CapEx ratio to remain up to 3% of group sales. Let me conclude the presentation with some key takeaways on the next page, please. Although the global commercial vehicle market is currently subdued, we were able to achieve a solid first quarter, also thanks to robust aftermarket business, and with a margin of 9.5%, we almost reached the previous year's level and were even able to further expand our adjusted EBITDA margin thanks to our operational strengths.
As a result, we achieved a solid operating free cash flow and were able to further improve our financial profile. SAF-HOLLAND already proved last year that it's resiliently positioned and will also master the current challenges in 2025. Ladies and gentlemen, this concludes the presentation. We can now start with your questions. Operator, the first question, please. Thank you.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press 9 and star on your telephone keypad. In case you wish to withdraw your question, please press 3 and star on your telephone keypad. The first question comes from Yasmin Steilen in Berenberg. Please go ahead with your question.
Many thanks for taking my questions. I have three if I may, and I will take them one by one. The first one on the guidance, I just tried to get my head around the unchanged guidance, in particular on top-line, while you became more cautious on the U.S. trailer market and much more cautious on the U.S. truck market. Maybe you can walk me through what are the off-stepping effects just to remain confident on the guidance. That's my first question, please.
As I already mentioned, hello, Yasmin, good morning. This is Alex speaking. As I mentioned before, we already see some really good signs in April and May, order intake for specifically the EMEA OE markets, and this is basically mainly the OE trailer market looks very promising. We were fully booked in April, we were fully booked in May, so we did not do any three-day short-time work, which we used to do in the first three months of this year. We could not do that because, as I said, booked out good order intake for both, not only for the SAF product family, but also for the Haldex product family. Please do not forget, in that godown, we not only produce the trailer air disc brakes for SAF, but also for our very big customers in the trailer industry having their own axles.
We are quite happy to report now that we see a good order intake and also sales already in April and in May. The recovery in the EMEA market could come earlier than expected. We expected that in Q3 and in Q4. Q2 is quite good. Aftermarket development is quite robust, and we have some projects coming along, specifically some unusual product groups like swivel axles, low-bed axles coming in Q3 and Q4. This makes me very looking promising that we are going to achieve our guidance for this year.
Okay, perfect. Maybe just to follow up, could you share some more color on the other region as well in terms of order intake and development? Basically, your indications on the EMEA market were also kind of confirmed by Knorr-Bremse today. They were also referring to surprisingly robust development in the truck market. Maybe you can just give me more color also on your order intake developments, dynamics on the EMEA truck side, and then also with regards to the other region. That would be highly appreciated. Thanks.
You know that the main portion of OE business in EMEA comes from the trailer business. Truck business is not as strong as it is in the U.S. In the U.S., it's like 50/50 roughly. We talk truck and trailer, both OE. The truck market in Europe doesn't look bad, I have to say. Okay, so we get orders in. We started last year supplying the first truck OE manufacturer in Scandinavia with our air disc brakes for their trucks. Orders are coming in. We get some new inquiries from other truck manufacturers coming in. Our fifth wheel business is developing okay, I have to say, and air disc brake business also. I'm not worried about the truck market in Europe, I have to say. Now jumping to the other region, the second biggest region is Americas.
Aftermarket was paused a little bit in March due to the tariff uncertainties, so people were holding back with orders. We did not ship as much as we thought we would be shipping, but I am pretty sure that in the course of the second quarter, all the tariff discussions will be going away, and the government is releasing all, let's say, all the tariff issues to a better. OE-wise truck was also not too bad, I have to say. Orders are flying in for both fifth wheels, which is our biggest product portfolio there, but also for suspensions for the trucks. On the trailer side, I still have to say that specifically the container shuttle market is still dead. There was last year already nearly a -60%, -70%. It is still the case. Everybody is holding back with new investments.
The trailer is weak, truck is okay, I would say, and aftermarket is also okay. Now jumping to the APAC region, China does not play a big role for us, which is sometimes good, sometimes bad, but here we are profitable now in our both plants. We are having the old SAF plant and the old Haldex plant. They are both doing good with sales and with profitability. India at the moment is the biggest market for us in APAC. Investments are held back specifically in the mining sector because there is less demand for all the products coming from the mining, and also the financing at the moment is a little bit of an uncertainty. Australia, they were waiting for the election. The election is done last weekend. The old party is still the new party, which is in power, which is a good thing.
Also here, yeah, I have to say nothing specific to worry except India is struggling at the moment a little bit.
Okay, perfect. Thank you.
That's it, huh?
Yeah, that's very helpful. Just finally, a housekeeping question. Is there any specific reason for the 16% year-over-year and 7% sequential increase in factoring, and what should I expect for the remainder of the year? Many thanks. That's my final question.
Yeah, I can take this. Yasmin, hello also from my side. Last year, we did the factoring more in a kind of spot factoring procedure. Now we implemented it as a sustainable running factoring as it has some benefits as well in terms of financing cost. The EUR 40 million you have seen in this quarter is basically a running level that you can assume as a stable level for the year.
Okay, perfect. Very helpful. I'll step back into the line.
Thank you.
The next question comes from Jorge Gonzalez-Sadornil, Hauck Aufhauser investment banking. Please go ahead with your question.
Hello, good morning. Alex, I'm Frank. I also want to make you some questions on the different regions and the trends. Sorry if it's a little bit repetitive. The first one is on the aftermarket. It went down around 4% in the quarter, and I was wondering if there is a specific reason for this, if there is some lower stocking levels at the dealers, or if the comparable was too high last year. Is there any event here that we are missing? Because if I'm not wrong, you were expecting a stable development for the year. Is there any change to this, please?
Yeah, absolutely. If you see the, well, basically, we do not report the aftermarket numbers for the specific regions, but what I can share is in EMEA, the aftermarket was quite stable. We got a little bit of a decrease in aftermarket sales in the first quarter in the Americas region, and here specifically in the U.S. Mexico was still running, Canada was running, South America anyhow, but in the U.S., the dealers were holding back. If you compare Q1 2024 in the aftermarket versus Q1 2025, it was a very strong aftermarket quarter also in 2024. We are comparing a very strong quarter last year to a little bit weaker quarter in this year.
We did a little bit less sales in the aftermarket, and the only reason was that the dealers were a little bit cautious because of Trump announcing the tariffs specifically for China and other regions of other countries, and they were watching their working capital and inventories and basically reduced their levels of inventories by like two weeks or something like that. That's the main reason. I personally talked to three of the top aftermarket dealers in the United States, and they just said nothing to worry. We're just reducing a little bit of inventories.
Okay, I see. Then on the specific regional guidance or market numbers, I think you said that you are expecting when you were referring to the new numbers in North America. I want just to clarify if this is your numbers or ACT research numbers or.
This is a mix of our numbers and also external data and sources, and we put that together.
Okay. So with that.
We don't trust the numbers. We're always too negative. This is a mix between external sources and our internal knowledge and our talks with our customers.
Okay, that's interesting because I was going to comment to you that the trend in trailer for North America looks positive in comparison to the truck. It started really bad on a bad note, but in March, specifically, it was quite strong. Yeah, I was going to ask you if you are not seeing some improvement, no? Because I think the accumulated demand in North America for trailer is around 10% down, but in the last two, three months, it's clearly showing kind of a switch between truck and trailer with dealers cutting CapEx, but maybe investing a little bit more into trailer. Are you not seeing this also, this trend?
No, we see this, I would not say the last three months, but the last two months. In April and in May, we see this. It is a slight improvement, but still on a very low level. Specifically, I mentioned before the container shuttle market, which is also our business with all the slide boxes we are selling. There is a recovery because it was already down, as I mentioned before, 60%-70% last year. First quarter, it was down by nearly, it came to a standstill. We see recovery. We get more orders in and new inquiries, which is pretty good, and there are some bigger tenders now on the market. It is too early to say that Q2 will be like a hockey stick. I am not saying this. There is slight improvement.
We think there is a slight improvement in Q2 and a much better improvement Q3 coming.
Okay, thank you for the color. My last one is maybe two questions in one. Taking this into account and that you're basically drawing a more conservative scenario in your regional guidance for North America, but not a more optimistic in EMEA, and I think the tone was that things are improving a little bit. Why have you not changed the EMEA guidance? I know it's the most important one, maybe. Where do you see now with this picture, where do you see the guidance, more at the lower end or still at the midpoint? Thank you.
Paul, to be honest, it is too early to say. You know when Trump announced all the tariffs with his overview of the different countries and everything, we had to do our internal work. Also, what does it mean as an impact? Lucky us, we have a very good production network all across the NAFTA region with Canada, Mexico, and the U.S., so we can shift around that. It is at the moment too early to say. We typically report, we stay cautious. We also would like to stay cautious today. Hopefully, Washington is bringing some light into the tariff situation in the course of the second quarter. This is what we are expecting. Also, our people in the U.S. are telling us it's simply too early to say. If there is a positive trend continuing, then of course, we would like to update then our guidance in Q2.
Thank you very much for the answers. I go back to the line.
Thank you, Jorge.
The next question is from Nikolai Kampf, Deutsche Bank. Please go ahead with your question.
Yes, good morning. Nikolai from Deutsche Bank. Thank you for taking my questions too, and I will also raise them one by one. Maybe again, staying in the U.S., there's been a lot of talk about tariffs. Now there are also some tariffs considered to the truck industry, but I think you should see an impact on higher tariffs on steel and aluminum. Can you just give some color how this could impact you in Q2 and maybe going forward? For me, my first one.
Yeah, we do not see that impact in aluminum or steel because we buy in North America for North America. We do not buy any products coming from Europe or from China. Our impact is very limited. When you see the rest of the portfolio, it is also quite limited because we have a dual or triple sourcing strategy. Basically, our teams are not allowed to buy a product from two suppliers out of the same region or the same country due to risk mitigation, and we just shifted it around. Our impact is quite limited. There is a little bit of an impact, but we were able to also already give some price indications and price adjustments to our customers for this small percentage of higher costs coming from those tariff situations.
We immediately reacted and also added extra costs to our customers in all three segments, trailer, truck, and in the aftermarket.
Okay, I understood. Thank you. You mentioned the comments about the U.S. truck industry that you did good orders in April, actually, for fifth wheels. Just wondering because the overall intake for April for trucks was very soft. Was there maybe a specific segment or specific effect that actually drove your very good numbers in April for the U.S.?
I didn't say great or good. I said okay numbers. It was okay for us. We have the broadest product portfolio with all fifth wheels we are doing and other components we are supplying to trucks. We are not only supplying the fifth wheels, but also truck suspensions, our Neway product line, which is for off-road, heavy-duty, and specialty trucks. We got some good orders, not only for fifth wheels, but also for other components, pintle hooks, truck suspensions. The broad range we are doing also from the Haldex portfolio, which was okay. Okay?
Okay.
It's not surprisingly high. It is okay.
Okay is still better than what we see for the water industry, which was very soft. It sounds better than the other industry.
Okay, let's say it's better than the overall order intake for the truck industry.
Yeah. If you come first quarter 2024, we need to remember that we had first quarter 2024 good sales, but already lowering order intake because we went into this decline for the second drive last year. Comparing this also, you see that it's okay.
Understood. Thank you.
You're welcome.
At the moment, there seem to be no further questions. If you would like to ask a question, please press 9 and star on your telephone keypad. We have a follow-up question coming from Jorge Gonzalez-Sadornil. Hauck Aufhauser , please go ahead with your question.
Thank you for taking my follow-up. One question on the emission standards, new regulation in North America from 2027. You mentioned that you are not expecting pre-buys anymore in 2025. Do you have a view when the government is planning to announce anything regarding this, the EPA 2027, and if you see any haircut or the cancellation of it?
I wish to have a call with Mr. Trump to tell me when this is coming or not. Unfortunately, he's not answering my phone calls. Just a little joke.
He is too busy . You know better.
Yeah, we do not know. We plan for the worst if it is coming better, and they are still implementing the new Euro norms by January 1, 2027, even better for us. Because typically, whenever a new emission standard is in place or coming, you have 18 months of pre-buy. Basically, then 2026 would be very strong. Since all the truck manufacturers could not then supply all the orders within 2026, we expected normally that the last six months of 2025 also would then see a really good increase in orders coming from the truck manufacturers. We are planning for both scenarios, so we have sufficient capacity. Frank mentioned that we are now in the process of finishing our new production facility in Rowlett in the Dallas area in autumn of this year. We can then, if needed, close the old facility, move everything to the newer one.
We can keep both if it's needed, okay? We still have, or we have now for more than one year, our brand new fifth wheel facility, Peter Nicholas, across the Texan border on the Mexican side. We are ready to whatever scenario is coming. At the moment, we are planning that emissions might not come. If they are coming, we are ready, which would be even better because then 2025 would be even better than expected.
Okay.
To be honest, also here, it depends on the U.S. government.
Okay. So there is not any specific date when there could be an announcement or any specific timeframe for getting an answer, no?
No.
Okay. Thank you very much.
We think the tariff situation will be solved in Q2, but for the emissions, we don't have precise data when the government is deciding this.
Okay. Thank you very much.
If they are going to decide, I'm pretty sure they are investigating everything thoroughly, and then they come to the conclusion if they are deciding too late that the truck manufacturers cannot build all the orders in 2025, 2026. My personal opinion would be that they are also coming within the next three to latest six months with that decision, but this is just my guess.
Great. Thank you for the call.
Thank you.
The next question is from Miro Zuzak, JMS Invest. Please go ahead with your question.
Yes, hi gentlemen. Thank you for taking my question. I have two at the moment. I would like to take them one by one. The first one is regarding the cost lines and cost development. You mentioned that obviously you have the production footprint in the U.S., but also in Europe, we still have the effect of some new tariff agreement, which will kick in during the course of the year. On a like-for-like basis and maybe focusing on wage costs, how much do you expect the wage costs to be higher for the group now in 2025 compared to 2024? We know on an all else equal basis, so tariffs probably was just the wage increases.
Yeah, for the question, I can take this. If you look into our footprint, we have our main production in Germany, so that was a quite okay agreement starting with a small wage increase in April. What is okay for us, the internal target is always to find productivity ideas to offset wage increases, and overall in our P&L, salary has not a really big impact. We do not expect here a big pressure or something that you would note in our P&L. The same applies for the other big market, America. As Alex mentioned, we opened our new facility in Mexico, having a good answer on wage increases in the U.S. Overall, I think this is nothing that makes us nervous, it is all under control.
It is priced in.
Yeah, it is all in. Yeah. No surprise expected.
Okay, cool. The second question would be basically you mentioned that you expect in H2 or even Q3 a significant acceleration of your top line. Could you please tell me what, because there is a lot of uncertainty at the moment. We hear basically from all across the board, we hear that there is softness everywhere where you look. The person who asked the question before told about the class A order intake, which is, I think, around 50% in April. What is your bullish statement for Q3 and Q4 based upon? I mean, I understand European trailer, you mentioned that one, but maybe you can repeat again what are the tangible signs that you see that would hint towards an acceleration in Q3 and Q4?
Miro, I didn't say there would be a hockey stick in Q3. I said that there will be a recovery in the trailer segment, and I also reported that we already see when you see the order intake for both the SAF axles in April and May and also the air disc brakes for trailer axles, for other trailer axles in the market, that we got an increase of orders coming in, which is a good indication for both that, first of all, we are keeping our market share or even increasing our market share in Europe for sub-axles and suspensions, but also the indication for, let's say, the two big trailer manufacturers who have their own axle.
They also run mainly on our air disc brakes, so they're getting, they're sending more orders and more orders, and they wouldn't do that if they're not confident that they have also their order book filled within the next six, eight, 10 weeks. We speak to everybody and see that a lot of people, specifically also in the DACH region, were waiting for the German government to come into power. Knock on wood, they are now since yesterday in power. They got a change, and there will be a fresh wind coming. We see the mood of our customers, both our OE customers, trailer manufacturers, but also the fleet owners. It's getting better, and this is a very good indication that the market is coming and combined with our order intake in April and May and also our production output for April and May.
I'm quite confident that Q3 will be, there will be a recovery in the trailer market here in Europe. In Asia, we are working very hard to get more market share and specific projects kicking in. I also mentioned that I hope that and see that the trailer market in the U.S. is slightly getting better. To summarize, we think the second half of the year will be better than the first half of the year, but it's not like a hockey stick, so we're not doubling our sales, but it will be much better.
Okay. Just the third one, if I may, regarding the gross margin, which was obviously super strong in Q1. You wrote in your report that this is also due to the first-time consolidation of TECMA. The increase, is this a level that we should assume also for the full year, the 23.4%? Because if I look at last year, you had 21.5%, and then with the consolidation of TECMA, it jumped by roughly 1 percentage point. You also mentioned one year ago the Haldex synergies. In other words, is the 23.4% a sustainable gross profit margin for the future?
First of all, I think TECMA, if you look at the overall size on TECMA, TECMA consolidation cannot have a big impact on the complete group. It is maybe one small piece on it. Gross margin improved from the synergy from Haldex consolidation. We do have really a strong operational performance on productivity improvement, and also the improved aftermarket share is bringing us a big contribution on the gross margin. Having now almost 38% aftermarket share of total business, this is the main contributor for gross margin development. If we would keep the sales structure OE aftermarket in that way, this can be also a good sustainable number to extrapolate our numbers. If we get a stronger recovery in OE, mathematically, it is clear that the gross margin in a mix may get a little bit down, but overall, it will improve.
Yes. It is the mix.
It's the product mix because if you have less OE, which typically comes with a much lower gross profit than aftermarket parts, then you have a little bit shift. Of course, we're working hard in all regions to increase the gross profit and also to increase further our adjusted EBIT. I like double-digit adjusted EBIT margins. We showed that we were able to bring that already last year. This is why we have our guidance between 9%-10%, but we are working towards increasing also our margins, of course.
Cool. Thank you very much. Congratulations again. It seems like you're doing a great job in terms of customer wins and product-specific growth. Well done.
Thank you.
For any further questions, please press 9 and star on your telephone keypad. Okay. If there are no further questions from the audience, I would like to hand the floor to CFO Frank Lorenz-Dietz for closing remarks.
Yeah, okay. Thank you, everyone, for attending the call and for your questions. The investor relations team is available in case you have any follow-up questions. We will potentially meet on the road in the next weeks and months attending conferences or roadshows, and I look forward to seeing you there in person. Thank you very much.
Thank you.